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Game Digital warns on profits as kids buy fewer games

Game blamed weak sales since the start of the school Christmas holidays

Sales of older-format Xbox 360 and PlayStation 3 software fell more than expected

Video game retailer Game Digital (LON:GMD) warned on profits after disappointing sales in the run-up to Christmas.

Game said it expected adjusted pre-tax earnings before interest, depreciation and amortisation in the 26 weeks to January 23 to be about £30mln.

It blamed weak sales since the start of the school Christmas holidays and an unexpectedly steep fall in older-format Xbox 360 and PlayStation 3 game and software sales, down 56.7% to £23.4mln.

The company also attributed the drop to a slower-than-expected take-up of sales of new and pre-owned Xbox One and PlayStation 4 software, which rose 20%.

However, it said UK retail margins in the second half should be higher than the equivalent period in the previous year.

That would be due to expected growth in sales of Xbox One and PlayStation 4 software, sales of pre-owned mobile phones and tablets, and other growth categories in Game Retail UK as well as the reducing impact of declining Xbox 360 and PlayStation 3 software sales.

Game Spain was expected to continue to perform above last year in the second half.

Total group gross transaction value (GTV) of £466.8mln fell 6.7%, largely explained by the reduction in low margin console sales, down 20.3%.

Game Digital said trading in the UK retail market was tough with Total sales for the video games market down 13.5% year-on-year.

UK GTV was £353.5mln, down 11.4% year-on-year, as Black Friday weekend trading exceeded the group's overall performance.

Game Digital chief executive Martyn Gibbs said: "The trading conditions in the UK video games market have been challenging.

"The switch-over from the older gaming formats to PlayStation 4 and Xbox One software has impacted profitability across the UK market.

"The extent of the impact of this switch-over has only become apparent in December which has been compounded by lower year-on-year high street and shopping centre footfall.

"The pre-Christmas period and the winter sale are very important to our customers and with market-leading offers, we remain well prepared in our stores and online for the remaining peak trading period."

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